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After receiving a $145 billion bailout in May 2010, Greece is now seeking a second larger bailout from the European Union (EU) and the International Monetary Fund (IMF). Here we go again. Of course, throwing even more money at the European welfare state won’t solve its problems. The Greek government created their own problems by rapidly expanding the welfare state over the past couple decades. A second U.S. taxpayer-financed bailout of Greece will only make the debt situation worse in the long-run.
Greece is a prime example of how socialism doesn’t work in practice. As U.K. Prime Minister Margaret Thatcher said, “the problem with socialism is that you eventually run out of other people’s money.” Greece’s government debt as a percentage of Gross Domestic Product (GDP) is a staggering 140 percent. The size of Greece’s bloated public sector is unsustainable. One out of every five Greeks is employed by the government. Some employees in the Greece Parliament do not even bother showing up to work because there are not enough places for all of them to sit, according to the New York Times.
The EU and the IMF have ordered that Greece implement austerity measures in exchange for a $171 billion bailout. On Sunday night, the Greek Parliament passed the required package of tax increases and spending cuts. The tax hikes will only further hurt their fragile economy while the spending cuts are too little, too late. The passed public sector wage and pension cuts have sparked violent riots in the streets of Athens. That’s what happens when citizens become dependent on the welfare state.
The country is fully capable of solving its own economic problems. Massive spending cuts could get Greece out of this mess once and for all. Some argue that a bailout is necessary since a Greece default could lead to defaults in other European countries. But it’s important to look at the long-term picture. Bailing out Greece again will only lead to more fiscally irresponsibility in countries around the world. When you subsidize bad behavior, you will get more bad behavior. Governments are more likely to implement reckless fiscal policies if they are guaranteed a bailout when they go broke.
A better idea is to send a message that European welfare states need to get their fiscal houses in order. The U.S. is the only nation with the power to veto any IMF bailout. It’s time that we stand our ground and finally use this veto power. U.S. taxpayers should not be held responsible for the bad economic policy decisions in other countries. If we bail out Greece again, how long will it be until they ask for a third bailout? One more bailout will not fix Greece’s long-term economic problems.
While stopping a second Greece bailout is the immediate goal, the larger goal should be for the U.S. to withdraw from the IMF. It's an unconstitutional international bureaucracy that subsidizes bad behavior.